ABC Reports a Steep Climb in Traffic

20. July 2015

The Russian all-cargo carrier gains further momentum, shown by the 218,000 tons of cargo transported in the first six months of 2015 – a 17% increase y-o-y. This represents a 22% rise in
freight ton-kilometers. The load factor stood at 67% for the first half of the year, a level above the industry average. The upswing is based on three core reasons.

Robert van de Weg / pictures: hs

When looking a bit closer at the traffic figures a number of aspects emerge explaining the recent market success the carrier enjoyed lately and will presumably also capitalize on in the coming
months.

Smart network combinations
First thing to mention is the service concept which relies on a mix of dense trunk routes served daily or even more often such as Frankfurt-Moscow-Shanghai in combination with decentralized
services between Moscow and Malmoe, Milan, Zaragoza, Munich, Helsinki or Hanoi, for example. This fine-tuned network combination “enables high on-time performance and avoids long transit times
through trucking hubs,” explains Robert van de Weg, ABC’s Senior VP of Marketing and Sales. A second success factor was ABC’s decision to expand its presence in North America via its Moscow hub.
Mr. van de Weg states: “This way we reduced our dependency on the China to Europe flow of trade.” It was primarily a reaction to Chinese exports that went south lately, as did the rates.

Increasing the focus on the U.S.
This is documented in the latest traffic figures that record a remarkable 26% growth of tonnage on ABC flights from Europe to China versus a comparatively small increase of only 6% on westbound
routes.
As result of this shift in the market ABC added Los Angeles to its network and upped the frequency to Chicago and Dallas, resulting in double-digit growth in the U.S. In addition to this, ad-hoc
flights were executed during the period of port-backlogs in the U.S. earlier this year. The company stresses that 20,300 tons were transported from North America in the first six months of this
year, a record number.

Additional routes will be flown
Meanwhile, market penetration in North America continues with more routes to the U.S. being offered by the carrier. Mr. van der Weg confirms: “We are looking at starting operations between Hong
Kong and the USA via the transpacific route later this year. Furthermore we plan to add capacity from Shanghai to the USA. In this context we intend to open up in Atlanta.”
Robert adds to this that as of September ABC will start operating to Singapore from Moscow, offering additional connectivity in the APAC region from the carrier’s online European stations.

Built-In Advantages
Finally, in addition to the management’s smart sales strategy, the far-seeing fleet development program and the carrier’s ingenious network strategy a third essential aspect must be emphasized to
explain the ongoing upswing of the Russian all-cargo carrier: its advantageous geographical position that it is constantly capitalizing on with Moscow Sheremetyevo Airport as a main transit
hub.
The airport is ideally located since most air traffic routes linking China with Europe are operated in a corridor which lies within 1,000 km north or south the Russian metropolis. Being licensed
in Russia, unlike most of its international competitors, ABC is exempt from paying royalties or overflight charges to the government, creating a financial advantage over its competitors.

Economic optimism prevails
The expectation is that ABC’s dynamic growth will continue. This was indicated in a statement given by Denis Ilin, the carrier’s Executive President: “AirBridgeCargo is progressively developing
as a global air cargo carrier, investing heavily in its fleet, human resources and route network development to support its clients’ global supply chains.” The manager goes on to say: “ABC is
very well positioned to bring in additional capacity later this year in front of the high season.” Asked about the business perspective in the second half of 2015 Ilin speaks about his
expectations of a more stable rather than fantastic peak season.

Is ABC back in the running to acquire Martinair?
It is pretty well known in aviation circles that ABC was back in 2013/2014 in discussion with AF-KL management to try and buy or go into a joint venture with Martinair (MP).
The talks fell through but now information published by the well informed Dutch trade paper, Nieuwsblad Transport indicates that ABC’s management would be more than happy to take over the MP
operations if AF-KL who are fighting to generate cash, might still be willing to divest themselves of the freight carrier.
Mr van de Weg is quoted as having said that ABC’s interest in acquiring Martinair is still there.
He went on to say that “Martinair was still a good company with a great reputation in the air cargo market and that it would make an excellent addition to ABC’s present network.”

Where there’s smoke, there’s fire!
There is no official comment from AF-KL side.
Bram Graeber, Executive VP at AF-KL cargo so far rules this possibility out.
At least that’s what he’s saying for the time being in a recent written statement whereby he still maintains there are no plans to sell or joint venture MP Cargo with others.
But why not?
The cargo fleet at AF-KL is being radically reduced and some nearer to the scene see it as only inevitable that their freighters will disappear altogether.
So, why not hand over to ABC who is proving day by day that they are a force to be reckoned with in the air cargo scene and who would presumably make good use of the MP product.